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It’s the phrase that will be dominating the airwaves in the days and months to come as the pundits and prognosticators leave the 2012 election behind and turn their attention to dire predictions of economic collapse should the government allow us to tumble over “the fiscal cliff.”

So, exactly what is the fiscal cliff and why is everyone so worried about it?

At its core, this economic event destined to dominate our lives for the foreseeable future is an accident of timing resulting in a one-two punch.

Think of it as the economic version of Hurricane Sandy that ripped through the northeast in the past few weeks. On its own, the hurricane could cause a lot of damage. However, when two additional weather fronts—that just happened to be in the wrong place and the wrong time—combined with the hurricane, Sandy became an exponentially devastating storm, causing loss of life and billions upon billions in property losses.

One hopes that nobody will die as a result of the fiscal cliff. However, it is very serious, indeed.

If economists are correct, the failure to resolve this problem could send the U.S. economy into a severe contraction as money is sucked out of our pockets due to a rise in the tax payments that will be required of the average American family at the very same time less money will be flowing into our pockets due to dramatic cuts in government spending.

It begins with the December 31, 2012 expiration of the Bush tax cuts. These were originally scheduled to expire at the end of 2010 but were extended two years ago in a horse trade between President Obama and the GOP controlled Congress. You may recall the December deal, following on the heels of the Republican wave election victory of 2010, wherein President Obama agreed to continue the tax cuts for all Americans in exchange for Congress agreeing to extend long-term unemployment benefits for the many Americans who were out of work.

Should the Bush tax cuts now be permitted to expire, taxes will go up for most Americans—an increase that would extend to the taxes we pay on our earnings, investments and inheritance along with the removal of a number of tax incentives that have been made available to businesses for things such as research and development.

But the expiration of the Bush tax cuts is just the beginning.

The temporary, two percent reduction in payroll taxes that the Obama administration pushed through so that consumers could have a few more dollars to spend is also scheduled to end on December 31 of this year along with the long term unemployment benefit extension mentioned above.

Adding to the misery is the reality that, beginning on January 1, some 26 million households will again become subject to the alternative minimum tax which is estimated to raise taxes for many Americans by as much as $3,700.

When it is all said and done, the expectation is that the average American household will be paying $2,000 to $3,000 more in taxes each year—leaving them with $2,000 to $3,000 less to spend in our consumer driven economy.

Not a good thing as we struggle to get the economy on a more solid footing.

But we’ve only just gotten started.

While the expiration of all these laws that have provided Americans a measure of tax relief dating back to 2001 will deliver the ‘set up’ punch, the ‘closer’ comes from the sudden and immediate reduction in government spending that hits on January 1—courtesy of the failure of the White House and the Congressional GOP to reach a more reasonable agreement in 2011 to resolve the debt ceiling crisis.

This is the ‘sequester’ you’ve heard so much about.

The cuts hit all areas of the federal budget, including a $55 billion reduction to the Pentagon’s budget in 2013, a reduction of payments to physicians participating in Medicare, substantial cuts to FEMA and the Dept. of Education budget along with a host of serious reductions across the wide ranging operations of the federal government.

What’s more, few players on either side of the political aisle actually like these large budget cuts.